Articles Posted in Federal Court Procedure

When litigation is possible or pending in a federal case, the litigants should take care to instruct those in possession of documents and especially electronically stored information to preserve and prevent loss of such documents. If the litigation has begun, or is reasonably anticipated, lawyers should send a letter by way of email or written notice to the other side to put them on notice that there is a duty of preservation that has been triggered. They should also describe the electronically stored information believed to be relevant in a case that should be preserved.

The newly amended Rule 37(e) authorizes what measures the courts can use if the electronic information that should have been preserved has been destroyed or lost.

Amended Rule 37(e) provides:

Rule 37. Failure to Make Disclosures or to Cooperate in Discovery; Sanctions

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Menzies Aviation and CenterPoint Properties Trust entered into a 10-year lease for a warehouse near Chicago’s O’Hare International Airport in 2007.  CenterPoint owned the warehouse, while Menzies operated an aircargo handling business that included the use of 15,000- and 30,000-pound forklifts.  The warehouse was a single-story, 185,000-square-foot structure built in 1998.

The warehouse had a 6-inch concrete slab that did not show any damage in 2007.  However, by January 2009, the concrete slab was cracking and scaling along the surface and was damaged along the contraction joints.

This type of wear was not typical, but rather was caused by Menzies’ use of heavy forklifts.

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James Brooks was severely injured in a work accident in which he lost his left hand, wrist and forearm. Brooks was an assembly-line operator for Prairie Packaging Inc.  The on-the-job incident resulted in the filing of a worker’s compensation claim in 1999, the year of this accident. In addition, Brooks sought recovery for a permanent and total disability because of the loss of his limb. 

Prairie Packaging kept Brooks employed despite his inability to work, treating him as a disabled employee on company-approved leave of absence.  In the meantime, Brooks continued to receive healthcare coverage under the company’s employee-benefits plan.

Brooks’s medical costs were paid by the employer-placed health insurance and supplemented by payments through the worker’s compensation action. 

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The U.S. Court of Appeals for the Seventh Circuit in Chicago has affirmed a decision by a trial judge that led to the forfeiture of an oil and gas franchise. Emmanuel Joseph operated a British Petroleum (BP) service station in Chicago.  Sasafrasnet, LLC was the authorized distributor of BP products.  Joseph was the franchisee with Sasafrasnet being the franchisor. 

In November 2010, Sasafrasnet served Joseph with notice of its intent to terminate the franchise. The termination was based on the three occasions when Sasafrasnet’s attempt to debit Joseph’s bank account to pay for fuel deliveries was declined because of insufficient funds. 

In May 2011, Joseph sought a preliminary injunction to stop the termination. The U.S. District Court judge denied the request finding that Joseph chose not to show “sufficiently serious questions going to the merits to make such questions fair ground for litigation.” Joseph appealed the denial to the Seventh Circuit Court of Appeals. The appeals court first returned the matter to the trial judge for additional findings and conclusions on whether Joseph’s insufficient funds denials amounted to “failures” under the Petroleum Marketing Practices Act (PMPA). PMPA is a federal law that regulates the sales of many petroleum products by producers of oil and gas products to franchised dealers who sell to the public.

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Kraft is a well-known manufacturer of food products sold in grocery stores.  It has been selling packaged cheeses sold under the trademarked “Cracker Barrel” label.  Kraft has been selling under that name for more than 50 years.  Thousands of grocery stores carry Kraft cheeses bearing that label. Kraft does not sell any non-cheese products under the name Cracker Barrel. 

Cracker Barrel Old Country Store (CBOCS) is a well-known chain of low-priced restaurants. It opened its first restaurant in 1969. There are more than 620 restaurants now operating, many of them located just off major highways.

When Kraft learned that CBOCS planned to sell a variety of food products, such as packaged hams in grocery stores under its logo, “Cracker Barrel Old Country Store” (the last three words are in smaller type in the logo), Kraft filed this lawsuit. Kraft claimed that many customers would be confused by the similarity of the companies’ logos and would think that food products so labeled were Kraft products. 

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In a class action brought by Motorola investors it was maintained that during 2006, the company made false statements in order to disguise its inability to deliver a mobile phone for sale that would employ three different protocols. When it became public that Motorola could not produce the new mobile phone, its stock sank significantly. 

After the lawsuit had been pending for four years, the district court denied Motorola’s motion for summary judgment. After that, the parties settled for $200 million. The class members approved the settlement, but objected to the judge’s decision to award 27.5% of the settlement to the trial lawyers who represented the class.

One of the former class members filed an objection a month after the deadline. Though he filed an objection to the award of legal fees, the objector chose not to file a claim for his share of the settlement fund. As a result, the court of appeals concluded that the objector lacked any interest in the amount of attorney fees awarded and as a result, dismissed his appeal.

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Bank of America (“Bank”) lost about $34 million when Knight Industries went bankrupt. In the Bank’s lawsuit under federal diversity jurisdiction, it was alleged that Knight’s directors and managers looted the company and that its accountants neglected to detect the fraud. The parties had agreed that Illinois law applied. The district court dismissed all of the Bank’s claims on the pleadings on a motion. 

The accounting firm, Frost, Ruttenberg & Rothblatt, P.C. were Knight’s accountants.The accountants sought to invoke the protection of Illinois law under 225 ILCS 450/30.1, which provides that an accountant is liable only if the accountant himself/herself committed fraud or “was aware that a primary intent of the client was for the professional services to benefit or influence the particular person bringing the action.”  The district court here concluded that the bank’s complaint did not allege plausibly that the accounts knew that Knight’s “primary intent” was to benefit the bank. 

The lawsuit alleged that the accountants knew that Knight furnished copies of the financial statements to its lenders, including the Bank. But the district court judge observed that auditors always know that clients send statements to lenders (existing or prospective). The statute would be ineffectual if knowledge that clients show financial statements to third parties were enough to demonstrate that the client’s “primary intent” was to benefit a particular lender.

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Peggy LeGrande, who worked as a flight attendant for Southwest Airlines, was injured when the plane she working in encountered severe turbulence. She brought a lawsuit against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. §2674, claiming that the air traffic controllers employed by the Federal Aviation Administration (FAA) were negligent when they chose not to warn the flight’s captain that turbulence had been forecasted for the plane’s flight path.

At the federal district court level, the judge ruled that FAA employees did not breach any duty owed to Ms. LeGrande and granted summary judgment to the United States. On appeal to the Seventh Circuit Court of Appeals, the plaintiff sought reversal of the district court’s judgment.

On appeal and for the first time, Ms. LeGrande raised the issue that her injuries came from the negligence of a National Weather Service (NWS) meteorologist. Because the FAA breached no duty owed to Ms. LeGrande and because she failed to give NWS the written notice that the FTCA statute requires, the Court of Appeals affirmed the judgment of the district court.

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The Seventh Circuit Court of Appeals has found in favor of a truck driver, Billy Couch, employed by B&B Trucking, a U.S. Postal Service contractor that sued the government under the Federal Tort Claims Act (FTCA) for injuries he suffered. The court considered whether the postal service was immune under the Illinois Workers’ Compensation Act as a “borrowing employer.”

However, since this case was a federal matter, the federal courts have applied an alternate definition of “loaning employer.” Belluomini v. United States, 64 F.3d 299 (7th Cir. 1995), and Luna v. United States, 454 F.3d 631 (7th Cir. 2006).

In this case, Couch’s employer was a contractor engaged by the U.S. Postal Service, hauling mail to postal facilities. Couch was delivering a truckload of mail to an Elk Grove Village, Ill., facility. A federal employee allegedly ran over Couch’s foot with a forklift and injuring him. Couch died two years later from lingering complications stemming from that injury.

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Kurt Henriksen was driving westbound on Eagle Lake Road in Peotone, Ill., when a postal worker was driving northbound on 104th Street and pulled out from a stop sign directly in front of his vehicle. Henriksen had the right of way; a high-impact collision occurred involving the two cars.

The rural route postal carrier was delivering mail in her own car. Before the crash, Henriksen, 53, had a long history of low back and leg pain following a low back fusion. He had been treating with a pain management physician for over 12 years and managed his pain with medicine.

Following this crash, Henriksen developed increased back pain, increased left leg pain and pain radiating into his right leg and foot.

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